Before the Income Tax: How the Federal Government Balanced the Budget before 1913: Yes, the U.S. Government Did at One Time Run Large Budget Surpluses, and the Revenue Was Generated without Resorting to an Income Tax

By Eddlem, Thomas R. | The New American, February 4, 2013 | Go to article overview

Before the Income Tax: How the Federal Government Balanced the Budget before 1913: Yes, the U.S. Government Did at One Time Run Large Budget Surpluses, and the Revenue Was Generated without Resorting to an Income Tax


Eddlem, Thomas R., The New American


This year--2013--marks the 100th anniversary of the modern income tax, a tax that dominates the revenue scheme of the federal government today. Individual income taxes accounted for about 45 percent of all federal tax revenue in 2012, along with 35 percent for Social Security and Medicare payroll taxes (which are also a tax on income), 10 percent for corporate income taxes, and only 10 percent for all other tax sources.

It wasn't always so. Prior to ratification of the 16th (income tax) Amendment in February 1913, the federal government manned its few constitutional responsibilities without an income tax, except during the Civil War period. During peacetime, it did so largely--or even entirely--on import taxes called "tariffs." Congress could afford to run the federal government on tariffs alone because federal responsibilities did not include welfare programs, agricultural subsidies, or social insurance programs like Social Security or Medicare. After the Civil War, tariff revenues sometimes suffered under a protectionist policy ushered in by the Republican Party that supplemented federal income via excises on alcohol, tobacco, and inheritances. But before the war, the need for tariff revenue to finance the federal government generally kept the tariff at reasonable levels. During wartime throughout early American history, the Founding Fathers were able to raise additional revenue employing a different method of direct taxation authorized by the U.S. Constitution prior to the 16th Amendment. These alternative taxing methods gave the young American nation embarrassing peacetime budget surpluses that several times came close to paying off the national debt.

[ILLUSTRATION OMITTED]

In one instance, the U.S. government paid off its entire national debt without the existence of an Internal Revenue Service. President Andrew Jackson boasted in his veto of the Maysville Road Bill in 1830 that God had blessed the nation with no taxes (except tariffs on imports) and no national debt:

  Through the favor of an overruling and indulgent
  Providence our country is blessed with a general
  prosperity and our citizens exempted from the pressure
  of taxation, which other less favored portions of the
  human family are obliged to bear. ... How gratifying
  the effect of presenting to the world the sublime spectacle
  of a Republic of more than 12,000,000 happy people, in
  the fifty-fourth year of her existence, after having passed
  through two protracted wars--one for the acquisition and the
  other for the maintenance of liberty--free from debt and
  all her immense resources unfettered!

In reality, Jackson had jumped the gun on his boast. The national debt would not be paid off for five more years, until the 1828 "Tariff of Abominations," which were high tariffs primarily on British manufactured goods meant to protect northern U.S. industries, and as the compromise tariffs of 1832 and 1833 had created several years of massive budget surpluses. But "Old Hickory" presided over a nation where Congress had abolished all federal internal taxes, and no citizen saw a tax collector of the United States unless that citizen was in the business of importing foreign goods. And while American consumers were occasionally manipulated by outrageously high protective tariffs, especially the above-mentioned "Tariff of Abominations," inside the United States a massive free market emerged over which the U.S. government had almost no influence. Even the Tariff of Abominations was not so high that it choked off revenue for imports from every industry.

By way of contrast, the advent of the income tax prompted some congressmen to note that this tax was designed not principally for revenue--the U.S. government had always had plenty of money from tariffs--but to manipulate the American people and their choices in the market. "The character of the argument which had been made," Massachusetts Rep. Samuel McCall argued in a speech before the U. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Before the Income Tax: How the Federal Government Balanced the Budget before 1913: Yes, the U.S. Government Did at One Time Run Large Budget Surpluses, and the Revenue Was Generated without Resorting to an Income Tax
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.